Supporters of the ACA march out Ronald Coase and social cost to argue that the law should be upheld!
Ronald Coase won the Nobel Prize in Economics for showing that social costs are symmetrical.. . . In light of this, it is surprising how little role the core Coasian insight had in the Supreme Court’s recent oral argument about the Obamacare mandate. Much of the discussion seemed to take for granted that this mandate encroaches on individual liberty, depriving individuals of the “freedom” not to purchase health insurance.
But as Coase’s analysis makes clear, framing the issue in terms of individual liberty is deeply misleading. When the uninsured get sick and go to the emergency room for care they cannot afford, someone has to pay the costs. If the law gives the uninsured the right not to buy health insurance, then the costs for their emergency care are imposed on the insured, whose payments must cover the hospital’s costs. If the law instead requires the uninsured to buy health insurance, they become personally responsible for the cost of the care they receive.
In other words, the issue is not whether to have a mandate, but rather on whom the mandate should be imposed. If the Supreme Court strikes down Obamacare, we will simply return to the old mandate, which was imposed on the insured rather than on the uninsured. It is not clear why that mandate would be constitutionally preferable to a mandate that everyone pay his or her own way. It surely does not involve any less of an infringement on liberty.
A dose of Coase would go a long way towards clarifying the reality that the issue at stake is not individual liberty, but individual responsibility.
This is like a reverse-GMU argument.
Coase is still pumping out books at the age of 101 at the University of Chicago. Maybe someone can ask him what he thinks? (I think I know the answer).
Update: Jon Adler writes how this article misses the Coase mark.